^5.251 


INTERSTATE  COMMERCE  COMMISSION. 


IN  RE  THE  LOUISVILLE  AND  NASHVILLE  RAILROAD 
COMPANY  ET  AL 

THE  LIBRARY 

- onut — 

UH1VER8ITY  CF  ILLISQIS 

OPINION  ON  PETITIONS  FOR  RELIEF  UNDER  SECITON  FOUR  OF  THE 
ACT  TO  REGULATE  COMMERCE. 


Washington,  June  15,  1887, 


i 


THE  FOURTH  SECTION  OF  THE  ACT 
TO  REGULATE  COMMERCE. 


23113 


-/,• .  ..'r/ V  -• 

'rw  ,  ^  , 

■TT 


;  ■ 

.  T^, 

i 


1  ‘I 


i.r 

^1-  •  ■  ' 


7/ 


%r; 


•r- 


ic-*  ' '  •  ' . 


■  ^ 


•  --v*  •'■^tV  >|4'  -i.  '  '•■!.),  >  t.'. .I  T  ■' 


• '  •  ■  .‘i'"  ^y■l’■  r.  ’  ' 

W'i,  '  ’l'.' 


f 


^  s-  v 


.,  ;  -,r  -V. 


,^v..r-r  -..xv  ,;J  ^■:.  {  j.;. 


, it  ;.]-- 


•T-T  :'.^C^  . 


mi 


"I  *  ^  '  r  ‘ 

;:.  :  '  vi^A-  ■.  r  .  '  • 

,  '  -'Vr  :  .  ' 

■  >  ,  VH  , 

.(  ’  ' 

;  ' 

A»  1 

E-  ' '  ’  . 

/• 

'  ,'  .  ■  ^  : 

'  ■  ■  t 

■  ■‘'  ‘  i  •'  ^ 

1 ,  1 

'*  .'  1  :i'  Ml '  \ 

’  ■’  ■■t'tf’;.it  't- 

-■.»  ■  .1^  .. . 

'•tt  ^ '■  1  t.  >.!/»  1  i»\.„ 

■o  \d)jii'ir‘--  ' 

,  ■  -■  .•  -'.  ■■•  :-  tv’: 

>  .  ;;.l  r  ■  ' 
.  ‘ '  r~ 


;  I  I  <>it  ^ 


-r 


►'.  '.■•.i‘7''  'iW' 

.-•‘.I, 


'‘•Vij!.’  'vMi 


,  13  \ 
Y,  3 


^  Y> 


INTERSTATE  COMMERCE  COMMISSION. 


i'i  Washington,  Jtine  15,  1887. 

i  In  the  matter  of  the  petitions  ) 

,  ?  OF  I 

^  The  Louisville  and  Nashville  )> 

Eailroad  Company  and  | 

others.  3 


OPINION  OF  THE  COMMISSION. 


Cooley,  Chairman. 


07 


(Y? 

PJ 

V 

'  E 


0 

0 

/ 


The  Lq^iisville  and  Nashville  Railroad  Company  was  one  of  the  first 
to  apply  for  relief  under  the  fourth  section  of  the  Act  to  regulate  com¬ 
merce,  which,  after  declaring  the  general  rule  that  more  shall  not 
be  charged  or  received  in  the  aggregate  by  a  common  carrier  subject 
to  the  law,  for  the  transportation  of  passengers  or  of  the  like  kind  of 
property,  under  substantially  similar  circumstances  and  conditions  for 
a  shorter  than  for  a  longer  distance  over  the  same  line  in  the  same  di¬ 
rection,  the  shorter  being  included  in  the  longer,  proceeds  then  to  au¬ 
thorize  exceptions,  and  confers  upon  the  Commission  certain  powers  in 
respect  thereto. 

From  the  first  there  have  been  two  opinions  regarding  the  proper 
construction  of  this  provision  for  exceptions  j  one  view  being  that  no 
exception  can  be  lawful  unless  made  with  the  sanction  of  the  Commis¬ 
sion  ;  and  the  other,  apparently  better  supported  on  the  words  of  the 
statute,  that  an  order  of  relief  is  not  required  when  the  circumstances 
and  conditions  are  substantially  dissimilar,  since  the  carrier,  in  act¬ 
ing  upon  them,  would  commit  no  breach  of  law,  though  it  would  be  re¬ 
sponsible  in  case  it  were  found  that  the  circumstances  and  conditions 
were  misconceived  or  misjudged.  Under  this  last  vfiew  the  order  for 
relief  would  be  needful  only  when  the  case  was  not  one  of  plainly 
dissimilar  circumstances  and  conditions,  but  in  which,  nevertheless, 
there  might  be  reasons  and  equities  that  would  sanction  such  greater 
charge. 

The  Commission  is  informed  that  the  interstate  roads  north  of  the 
Potomac  and  the  Ohio  and  east  of  the  Missouri,  with  substantial 
unanimity,  have  conformed  to  the  requirements  of  the  fourth  section 
by  putting  in  force  tariifs  rearranged  accordiugly.  Some  friction  was 

R 


h 5G4T2 


4 


manifested  for  a  time,  arising  largely  from  the  discontinuance  of  special 
rates,  favors,  and  privileges,  and  from  tiie  adoption  of  new  classifica¬ 
tions  j  but  where  the  fourth  section  has  been  thus  made  operative  very 
few  instances  have  come  to  our  attention  of  injury  thereby  occasioned. 

The  roads  which  anticipated  especial  injury  to  commerce  from  the 
strict  enforcement  of  the  law  were  principally  those  situated  in  the 
Southern  States  and  the  transcontinental  lines.  After  a  little  time 
some  of  the  north  and  south  roads  in  the  territory  first  mentioned  found 
themselves  excluded  to  a  certain  extent  from  business  which  they  had 
previously  handled,  but  these  instances  were  not  numerous,  so  far  as 
the  Commission  is  at  present  advised. 

In  the  cases  where  loss  of  revenue  to  the  roads  and  injury  to  the  busi¬ 
ness  of  the  country  was  most  seriously  anticipated,  the  railroad  com¬ 
panies,  although  some  of  them  took  the  ground  that  the  statute  con¬ 
templated  they  would  determine  for  themselves  the  exceptional  cases' 
in  which  they  might  make  a  lower  charge  for  a  longer  haul,  neverthe¬ 
less  were  unwilling  to  incur  the  peril  of  so  arranging  their  tariffs  that 
they  would  in  any  instance  conflict  with  the  general  rule  which  the  act 
prescribed,  apparently  deeming  it  more  prudent  to  suffer  temporary  loss 
of  traffic  until  the  act  could  receive  authoritative  construction  than  to 
subject  themselves  to  heavy  penalties  in  case  it  should  finally  be  held 
that  the  general  rule  must  be  applied  in  every  case  until  the  authority 
of  the  Commission  for  making  exceptions  had  been  given.  The  Louis¬ 
ville  and  Nashville  Company  was  one  of  those  which  took  this  position, 
and  upon  its  application  a  temporary  order  of  relief  was  made.  Fol¬ 
lowing  the  making  of  that  and  of  other  like  orders,  the  Commission 
proceeded  to  take  a  great  amount  of  testimony  bearing  upon  .the  ques¬ 
tion  whether  the  several  carriers  relieved  were  warranted  in  making 
rates  on  their  lines  which  were  not  in  conformity  to  the  statutory  rule, 
and  in  doing  so  it  invited  light  from  all  sources,  and  was  glad  to  have 
the  assistance,  not  only  of  the  railroad  companies,  but  of  competing 
steamboat  owners,  of  boards  of  trade,  and  of  citizens  generally,  what¬ 
ever  might  be  their  line  of  business.  The  fullest  opi)ortunity  has 
been  afforded  to  any  citizen  of  the  United  States  who  desired  to  be 
heard  upon  the  matter,  to  present  facts  personally  or  by  affidavit,  and 
arguments  viva  voce^  in  writing,  or  in  print.  The  invitation  has  been 
quite  largely  accepted  ;  the  subject  has  been  laid  fully  before  us,  and 
we  have  endeavored  to  give  to  it  the  consideration  its  importance  de¬ 
mands. 

In  making  the  orders  of  temporary  relief  no  opinion  was  expressed 
upon  the  question  whether  they  were  necessary  for  the  protection 
of  the  carriers  in  case  the  circumstances  and  conditions  were  found 
to  be  in  fact  dissimilar.  The  railroad  companies  did  not  raise  that 
question,  but,  as  has  been  said,  elected  as  a  matter  of  prudence  to  ap¬ 
ply  for  the  preliminary  order.  No  objection  could  well  be  taken  to  this 
course  provided  it  should  prove  to  be  practicable  for  the  Commission  to 


5 


take  lip  and  in  a  reasonable  time  dispose  of  the  several  applications 
made  to  it ;  but  it  was  almost  immediately  perceived  that  the  number 
was  to  be  so  great  that  this  would  be  quite  out  of  the  question.  Each 
order  for  relief  would  necessarily  be  preceded  by  investigation  into  the 
facts,  on  evidence  which  in'  most  cases  would  be  best  obtained  along  the 
line  of  the  road  itself.  A  single  case  might  therefore  require  for  its 
proper  determination  the  taking  of  evidence  all  the  way  from  the  Pa¬ 
cific  to  the  Atlantic,  and  this  not  merely  the  evidence  of  witnesses  for 
the  petitioning  carrier,  but  of  such  other  parties  as  might  conceive  that 
their  interests  or  the  interests  of  the  public  would  be  subserved  either 
by  granting  the  relief  applied  for  or  by  denying  it. 

If  the  Commission  were  to  give  to  the  petitions  the  time  needed  for 
their  proper  determination,  it  would  be  compelled  to  forego  the  perform¬ 
ance  of  judicial  and  other  functions  which  by  the  statute  were  appar¬ 
ently  assumed  to  be  of  high  importance,  and  even  then  its  authority  to 
grant  relief  w'ould  be  performed  under  such  circumstances  of  embar¬ 
rassment  and  delay  that  it  must  in  large  measure  fail  to  accomplish  the 
beneficial  purposes  which  we  must  suppose  the  statute  had  iu  view. 
Assuming— as  we  must  when  the  law  provides  for  it — that  it  is  impor¬ 
tant  to  t\ie  public  interest  that  a  privilege  to  charge  more  for  the  shorter 
haul  than  for  the  longer  over  the  same  line  iu  the  same  direction,  should 
be  admitted  in  some  cases,  as  had  been  the  custom,  the  interruption  of 
the  jirivilege  when  the  case  was  proper  for  it  would  presumptively  cause 
mischief,  and  should  not  therefore  be  compulsory  while  the  slow  pro¬ 
cesses  of  ail  investigation  were  going  on,  especially  as  the  particular  in¬ 
vestigation  might  itself  be  compelled  to  await  the  determination  of  many 
others.  Moreover,  an  adjudication  upon  a  petition  for  relief  would  iu 
many  cases  be  far  from  concluding  the  labors  of  the  Commission  iure- 
spect  to  the  equities  involved,  for  questions  of  rates  assume  new  forms, 
and  may  require  to  be  met  diiferently  from  day  to  day;  and  in  those  sec¬ 
tions  of  the  country  in  which  the  reasons  or  supposed  reasons  for  ex¬ 
ceptional  rates  are  most  prevalent,  the  Commission  would,  iu  efiect,  be 
required  to  act  as  rate  makers  for  all  the  roads  and  compelled  to  adjust 
the  tariffs  so  as  to  meet  the  exigencies  of  business  while  at  the  same 
time  endeavoring  to  protect  relative  rights  and.  equities  of  rival  car¬ 
riers  and  rival  localities.  This  in  any  considerable  State  would  be  an 
enormous  task.  In  a  country  so  large  as  ours,  and  with  so  vast  a  mile¬ 
age  of  roads,  it  would  be  superhuman.  A  construction  of  the  statute 
which  should  require  its  performance  would  render  the  due  adminis¬ 
tration  of  the  law  altogether  impracticable,  and  that  fact  tends  strongly 
to  show  that  such  a  construction  could  not  have  been  intended. 

We  have  listened,  with  an  earnest  desire  to  reach  a  just  conclusion, 
to  all  the  arguments  presented  on  the  construction  of  the  statute,  by 
those  appearing  either  to  advocate  or  to  oppose  the  applications,  and 
after  mature  consideration  we  are  satisfied  that  the  statute  does  not 
require  that  the  Commission  shall  prescribe  in  every  instance  the  ex- 


6 


coplioiial  case  and  grant  its  order  for  relief  before  the  carrier  is  at  lib- 
erty  in  its  tarifis  to  depart  from  the  general  rule.  The  terms  of  the 
statute  clearly  lead  to  the  opposite  conclusion.  It  declares : 

“It  shall  he  unlawful  for  auy  common  carrier  subject  to  the  provisions  of  this  act 
to  charge  or  receive  any  greater  compensation  in  the  aggregate  for  the  transportation 
of  passengers  or  of  the  like  kind  of  property  under  substantially  similar  circumstances 
and  conditions  for  a  shorter  than  for  a  longer  distance  over  the  same  line  in  the  same 
direction,  the  shorter  being  included  in  the  longer  distance.” 

Here  we  have  clearly  stated  what  is  unlawful  and  forbidden;  and  for 
doing  the  unla  wful  and  forbidden  act  penalties  are  then  provided.  But 
that  which  the  act  does  not  declare  unla  wful  must  remain  lawful  if  it 
was  so  before,  and  that  which  it  fails  to  forbid  the  carrier  is  left  at  lib¬ 
erty  to  do  without  permission  of  any  one.  The  charging  or  receiving 
the  greater  compensation  for  the  shorter  than  for  the  longer  haul  is  seen 
to  be  forbidden  only  when  both  are  under  substantially  similar  circum¬ 
stances  and  conditions ;  and  therefore  if  in  any  case  the  carrier,  with¬ 
out  first  obtaining  an  order  of  relief,  shall  depart  from  the  general  rule, 
its  doing  so  will  not  alone  convict  it  of  illegality,  since  if  the  circum¬ 
stances  and  conditions  of  the  two  hauls  are  dissimilar  the  statute  is 
not  violated.  Should  an  interested  party  dispute  that  the  action  of 
the  carrier  was  warranted,  an  issue  would  be  presented  for  adjudica¬ 
tion,  and  the  risks  of  that  adjudication  the  carrier  would  necessarily 
assume.  The  later  clause  in  the  same  section,  which  empowers  the  Com¬ 
mission  to  make  orders  for  relief  in  its  discretion,  does  not  in  doing 
so  restrict  it  to  a  finding  of  circumstances  and  conditions  strictly  dis¬ 
similar,  but  seems  intended  to  give  a  discretionary  authority  for  cases 
that  could  not  well  be  indicated  iu  advance  by  general  designation, 
while  the  cases  which  upon  their  facts  should  be  acted  upon  as  clearly 
exceptional  would  be  left  for  adjudication  when  the  action  of  the  car¬ 
rier  was  challenged.  The  statute  becomes  on  this  construction  prac¬ 
tical,  and  this  section  may  be  enforced  without  serious  embarrassment. 

From  the  recital  of  the  history  of  the  framing  of  this  section  (which 
is  given  further  on)  it  appears  among  other  things  that  the  proviso  re¬ 
specting  orders  for  relief  was  devised  by  the  Senate  committee  which 
originally  drafted  the  section,  and  that  it  was  an  essential  part  of  it  as 
first  proposed;  the  prohibitory  i)art  of  the  section  being  then  quite 
stringent,  but  a  discretion  being  conferred  upon  the  Commission  to  re¬ 
lieve  against  its  operation.  Afterwards  the  words  ‘‘under  substan¬ 
tially  similar  circumstances  and  conditions”  were  inserted  in  the  first 
sentence  of  the  section.  The  proviso  was  perfectly  intelligible  so  long 
as  the  leading  clause  contained  a  hard  and  fast  rule  against  charging 
more  for  the  shorter  than  for  the  longer  haul.  It  was  then  obvious  that 
a  discretion  was  left  to  the  Commission  in  the  matter  of  relaxing  the  rule 
when  different  circumstances  and  conditions  rendered  such  relaxation 
in  its  judgment  proper.  Had  the  section  passed  as  it  then  stood,  the 
exercise  of  such  a  discretion  might  have  been  entered  upon  by  the  Com¬ 
mission  with  a -distinct  understanding  of  the  task  imposed,  even  though 


7 


its  adequate  performance  might  have  been  out  of  the  question ;  but  modi¬ 
fied  as  it  now  stands,  the  necessity  for  a  relieving  order  is  greatly  nar¬ 
rowed,  it  being  obvious  that  no  order  is  needed  to  relieve  against  the 
operation  of  the  statute  when  nothing  is  done  or  proposed  which  it 
makes  unlawful. 

If  any  serious  doubt  of  the  proper  construction  of  the  clause  of  the 
statute  now  under  review  should,  after  careful  consideration  of  its 
terms,  still  remain,  it  would  seem  that  it  must  be  removed  when  section 
2,  in  which  the  same  controlling  words  are  made  use  of,  is  examined 
in  connection.  That  section  provides  : 

“That  if  any  common  carrier  subject  to  the  provisions  of  this  act  shall,  directly  or 
indirectly,  by  any  special  rate,  rebate,  drawback,  or  other  device,  charge,  demand, 
collect,  or  receive  from  any  person  or  persons  a  greater  or  less  compensation  for  any 
service  rendered,  or  to  be  rendered,  in  the  transportation  of  passengers  or  property,  sub¬ 
ject  to  the  provisions  of  this  act,  than  it  charges,  demands,  collects,  or  receives  from 
any  other  person  or  persons  for  doing  for  him  or  them  a  like  and  contemporaneous 
service  in  the  transportation  of  a  like  kind  of  traffic  under  substantially  similar  cir¬ 
cumstances  and  conditions,  such  common  carrier  shall  be  deemed  guilty  of  unjust 
discrimination,  which  is  hereby  prohibited  and  declared  to  be  unlawful.’’ 

Here  it  will  be  observed  that  the  phrase  is  precisely  the  same ;  and 
there  can  be  no  doubt  that  the  words  were  carefully  chosen,  probably 
because  they  were  believed  to  express  more  accurately  and  precisely 
than  would  any  others  the  exact  thought  which  was  in  the  legislative 
mind.  And  in  this  section,  as  well  as  in  section  4,  the  phrase  is  em¬ 
ployed  to  mark  the  limit  of  the  carrier’s  privilege  5  its  privilege,  too, 
in  respect  to  the  very  subject-matter  with  which  section  4,  where 
it  is  employed,  has  to  do,  namely,  the  charges  for  transportation 
service.  It  is  not  at  all  likely  that  Congress  would  deliberately,  in 
the  same  act  and  when  dealing  with  the  same  general  subject,  make 
use  of  a  phrase  which  was  not  only  carefully  chosen  and  peculiar, 
but  also  controlling,  in  such  different  senses  that  its  effect  as  used  in 
one  place  upon  the  conduct  of  the  parties  who  were  to  be  regulated 
and  controlled  by  it  would  be  essentially  different  from  what  it  was 
as  used  in  another.  But  beyond  question  the  carrier  must  judge  for 
itself  what  are  the  “  substantially  similar  circumstances  and  condi¬ 
tions”  which  preclude  the  special  rate,  rebate,  or  drawback,  which  is 
made  unlawful  by  the  second  section,  since  no  tribunal  is  empowered 
to  judge  for  it  until  after  the  carrier  has  acted,  and  then  only  for  the 
purpose  of  determining  whether  its  action  constitutes  a  violation  of  law. 
The  carrier  judges  on  peril  of  the  consequences ;  but  the  special  rate, 
rebate,  or  drawback  which  it  grants  is  not  illegal  when  it  turns  out 
that  the  circumstances  and  conditions  were  not  such  as  to  forbid  it ;  and 
as  Congress  clearly  intended  this,  it  must  also  when  using  the  same 
words  in  the  fourth  section  have  intended  that  the  carrier  whose  privi¬ 
lege  was  in  the  same  way  limited  by  them,  should  in  the  same  way 
act  upon  its  judgment  of  the  limiting  circumstances  and  conditions. 


8 


Most  of  the  applications  made  to  the  Commission  for  relief  may  be 
said  to  be  based  upon  a  showing  of  dissimilar  circumstances  and  con¬ 
ditions  claimed  to  justify  the  larger  charge  for  the  shorter  haul.  The 
Commission  was  asked  to  find  that  such  dissimilar  circumstances  and 
conditions  existed,  and  the  question  was  presented  in  a  great  variety  of 
forms.  Upon  this  question  it  was  believed  that  investigation  into  the 
conditions  of  railroad  service  in  the  States  south  of  the  Ohio  and  east 
of  the  Mississippi  would  be  particularly  useful.  In  the  system  of  rate¬ 
making  practiced  in  that  section,  the  making  of  a  greater  charge  on 
interstate  business  to  and  from  intermediate  stations  than  to  and  from 
competitive  points  requiring  a  longer  haul  had  been,  it  appears,  sub¬ 
stantially  universal,  and  business  men  in  the  larger  towns  united  with 
the  carriers  in  asserting  that  the  cessation  of  the  practice  would  force 
a  stoppage  of  trade  to  an  extent  that  would  be  destructive  of  many  con¬ 
siderable  interests.  That  section,  therefore,  seemed  to  afford  a  proper 
field  for  an  inquiry  into  the  reasons  supposed  to  justify  the  practice. 
When  the  investigation  was  concluded  the  reasons  which  had  been 
advanced  appeared  to  be  substantially  the  following  : 

That  the  support  and  maintenance  of  a  railroad  ought  properly  to  be 
borne  by  the  local  traffic  for  which  it  is  supposed  to  be  built,  and  the 
through  traffic  may  justly  be  carried  for  any  sum  not  below  the  actual 
cost  of  its  own  transportation. 

That  the  cost  of  local  traffic  is  greatest,  and  the  charges  for  carrying 
it  should  be  in  proportion,  and  if  they  are  so  they  will  often  result  in 
the  greater  charge  for  the  shorter  haul. 

That  traffic  carried  long  distances  will  much  of  it  become  impossible 
if  charged  rates  corresponding  to  those  which  may  properly  be  imposed 
on  local  traffic  5  and  it  must  therefore  be  taken  in  recognition  of  the 
principle,  accepted  the  world  over,  that  traffic  must  be  charged  only 
what  it  will  bear. 

That  the  long  hauls  at  low  rates  tend  to  build  up  manufactures  and 
other  industries  without  injury  to  the  traffic  upon  which  the  rates  are 
heaviest. 

That  charges  on  long  hauls,  which  are  less  than  the  charges  on 
shorter  hauls  over  the  the  same  line  in  the  same  direction,  are  commonly 
charges  which  the  carriers  do  not  voluntarily  fix,  but  which  are  forced 
upon  them  by  a  competition  from  whose  compulsion  there  is  practically 
no  escape. 

On  some  one  or  more  of  these  reasons  each  of  the  applications  was 
planted. 

On  the  construction  which  we  give  to  the  statute  these  several  ap¬ 
plications  need  not  have  been  filed,  and  therefore  they  might  now  be 
withdrawn  without  further  judgment.  But  though  the  carrier  might 
have  acted  on  the  judgment  of  its  managers,  it  would  have  been  at 
the  peril  of  the  consequences,  and  as  it  elected  not  to  assume  the  re¬ 
sponsibility,  but  to  apply  to  the  Commission  for  a  relieving  order,  it 


9 


may  be  proper  to  consider  the  application  on  its  merits,  especially  as. 
the  question,  What  is  a  case  of  dissimilar  circumstances  and  conditions 
within  the  meaning  of  the  law'?  must  in  general  be  a  mixed  question  of 
law  and  fact,  upon  which  differences  of  opinion  would  be  expected  to 
arise.  It  is  manifestly  important  to  the  public  interest,  as  well  as  to 
that  of  the  railroads  themselves,  that  mistakes  shall  as  far  as  possible 
be  avoided.  It  is  also  important  that  the  general  rule  laid  down  by 
the  statute  be  strictly  complied  with  whenever  compliance  appears  to 
be  fairly  practicable,  and  that  carriers  direct  their  attention  more  to 
the  feasibility  of  coming  into  conformity  with  it,  than  to  the  possibility 
of  finding  reasons  upon  which  to  ground  exceptions.  They  are  tliere* 
fore  entitled  to  the  benefit  of  such  conclusions  as  we  have  already 
reached  upon  the  general  merits  of  their  applications,  that  they  may 
be  guided  thereby  in  the  preparation  of  their  tariffs  respectively.  In 
giving  these  conclusions  we  limit  ourselves  strictly  to  the  cases  pre¬ 
sented,  and  leave  out  of  view  such  other  grounds  of  relief,  if  any,  as  are 
not  yet  formally  brought  forward. 

I.  The  fact  that  the  shorter  haul  is  of  local  traffic  and  the  longer  is 
not  we  cannot  accept  as  making  out  a  case  of  dissimilar  circumstances 
and  conditions  within  the  meaning  of  the  statute.  The  claim  to  that 
effect  which  was  advanced  in  support  of  one  of  the  applications  rests 
upon  a  theory  that  railroads  are  constructed  for  the  special  accommo¬ 
dation  of  the  traffic  along  their  lines  respectively,  and  that  consequent]}" 
that  traffic  may  be  relied  upon  for  their  support,  and  may  fairly  be 
charged  with  all  the  items  of  cost  and  maintenance.  Traffic  origiuatiug 
at  a  distance  and  taken  over  the  line  may  on  this  theory  be  justly  ti  ans- 
ported  at  any  rates  the  carrier  may  consent  to  accept  not  below  the 
actual  cost  of  movement,  and  the  local  shippers  are  not  in  position 
to  complain  that  such  rates,  as  compared  with  what  they  must  pay, 
seem  to  discriminate  unjustly.  But  this  theory  has  very  little  founda¬ 
tion  in  fact.  It  is  not  true,  as  a  general  rule,  that  railroads  are  con¬ 
structed  in  exclusive  reliance  upon  local  traffic  j  on  the  contrary,  through 
traffic  is  also  contemplated,  and  is  sometimes  expected  to  yield  returns- 
even  greater  than  that  which  the  local  traffic  is  likely  to  give.  And 
whenever  a  road  is  constructed  with  special  regard  to  local  traffic,  it  is 
very  likely  to  be  the  case  that  the  local  communities  take  upon  them¬ 
selves  especial  burdens  in  aid  of  the  construction.  When  they  do  so 
they  may  justly  claim  that  their  traffic  should  be  favored  if  discrimina¬ 
tion  of  any  sort  is  to  be  admitted.  There  are  cases  also  in  which  roads 
have  been  constructed  with  special  regard  to  long-haul  traffic,  some  of 
them  with  the  aid  of  Government  grants,  and  in  such  cases  the  theory 
lacks  all  plausibility.  Indeed  it  may  be  said  to  become  plausible  in 
any  case  only  when,  after  a  road  has  been  constructed,  some  new  and 
unanticipated  business  is  offered  it  for  long  haul,  but  at  rates  relatively 
lower  than  the  local  traffic  is  charged.  It  may  be  neither  unreasonable 
nor  unjust  to  accept  the  lower  rates  for  the  long  haul  traffic  in  some 


10 


cases  ou  grounds  stated  further  on  ;  but  it  will  not  be  because  of  any 
such  inherent  difference  between  long  and  short  haul  traffic  as  can 
make  the  latter  chargeable  with  heavier  burdens. 

11.  That  the  cost  to  the  carrier  of  handling  and  transporting  local 
traffic  is  greater  than  that  of  traffic  carried  long  distances  is  a  fact 
which  may  with  greater  reason,  when  the  difference  is  considerable  and 
clearly  shown,  be  claimed  to  make  out  a  case  of  dissimilar  circum¬ 
stances  and  conditions  under  the  statute.  Cost  of  the  service  is  always 
an  important  element  in  the  fixing  of  rates ;  and  the  evidence  taken  by 
the  Commission  tends  to  show — what  indeed  is  well  known  and  under¬ 
stood — that  in  proportion  to  amount  and  to  the  distance  it  is  trans¬ 
ported,  the  cost  of  the  local  traffic  to  the  carrier  is  considerably  the 
greater.  This  fact  fairly  establishes  in  favor  of  the  carrier  an  equity 
entitling  it  to  make  for  the  more  onerous  service  a  greater  proportion¬ 
ate  charge.  But  it  does  not  follow  that  the  difference  may  be  so  great 
as  to  make  the  case  an  exception  ,to  the  general  rule  the  statute  has 
prescribed.  It  is  obvious  that  the  statute  intends  that  the  greater 
charge  for  the  shorter  haul  shall  only  be  made  in  cases  which  ou  their 
facts  are  exceptional ;  and  when  the  carrier  shows  the  general  fact  that 
the  local  traffic  is  most  expensive  he  thereby  proves  not  the  excep¬ 
tion,  but  the  rule.  To  establish  the  exception  it  would  be  necessary 
to  go  further  and  make  proof  that  in  the  case  of  the  particular  traffic 
the  difference  in  cost  would  be  exceptionally  great.  Such  cases  some¬ 
times  arise.  They  occur  on  water  as  well  as  on  laud,  and  vessel  owners 
on  the  rivers  make  the  greater  charge  for  the  shorter  haul  in  the  same 
direction  in  many  cases,  defending  their  doing  so  with  good  reason  on 
this  very  ground  of  greater  cost,  in  making  landings,  &c.  The  carriers 
by  land  may  sometimes  justify  the  like  charges  with  equal  reason. 

There  is  in  the  case,  however,  an  inherent  difficulty  of  no  small  mo¬ 
ment.  While  cost,  as  has  been  said,  is  an  element  to  be  taken  into  ac¬ 
count  in  the  fixing  of  rates,  and  one  of  the  ver}-  highest  importance,  it 
cannot  for  reasons  well  understood,  be  made  the  sole  basis,  but  it  must 
in  any  case  be  used  with  caution  and  reserve.  This  is  not  merely  be¬ 
cause  the  word  ^^cost”  is  made  use  of  in  different  senses  when  applied 
to  railroad  traffic;  it  being  often  used  to  cover  merely  the  expense  of 
loading,  moving,  and  unloading  trains,  but  also  because,  in  whatever 
sense  the  word  may  be  used,  it  is  quite  impossible  to  apportion  with  ac¬ 
curacy  the  cost  of  service  among  the  items  of  traffic.  First  of  all  when 
it  is  undertaken  there  must  be  an  apportionment  between  the  passen¬ 
ger  traffic  and  the  freight  traffic;  and  if  we  suppose  this  to  be  made 
with  reasonable  accuracy  there  must  then  be  a  like  apportionment  be¬ 
tween  the  different  kinds  and  classes  of  freight.  Freight  comes  to  a 
road  in  infinite  variety ;  some  heavy,  some  light,  some  in  large  packages, 
some  in  small;  some  perishable  or  of  special  value  and  requiring  pecu¬ 
liar  accommodations  and  care;  it  is  picked  up  in  varying  quantities 
at  numerous  stations,  to  be  carried  differing  distances,  sometimes  on 


11 


fast  trains  and  sometimes  on  slow ;  the  service  is  performed  by  men 
whose  compensation  differs,  but  the  most  of  whom  have  something-  to 
do  with  all  branches  of  the  traffic,  so  that  all  assist  in  carrying  it  on 
over  a  road  and  by  means  of  buildings,  appliances,  and  equipment 
which  have  been  provided  for  the  whole.  Any  attempt  to  apportion 
the  cost  therefore  would  at  the  best  and  under  the  most  favorable  cir¬ 
cumstances  only  reach  an  approximation.  This  is  so  well  understood 
the  world  over  that  the  i^ropositions  which  from  time  to  time  have  been 
made  in  other  countries  to  measure  the  charges  of  the  carrier  by  the 
cost  of  the  carriage  solely  have  always  been  abandoned  after  investiga¬ 
tion. 

We  may  well  believe,  therefore,  that  the  statute,  in  its  provision 
against  the  greater  charge  for  the  shorter  haul,  did  not  intend  that  a 
difference  in  cost  which  is  practically  universal,  and  could  not  possibly 
be  arrived  at  with  accuracy,  should  as  a  general  fact  be  a  governing- 
consideration,  to  the  extent  that  would  support  the  greater  charge  for 
the  shorter  haul  in  the  cases  in  which  such  greater  charge  was  in  gen¬ 
eral  lirohibited.  Where  there  are  no  circumstances  to  make  the  short 
haul  exceptionally  expensive  to  the  carrier,  or  the  long  haul  relatively 
inexpensive,  a  difference  in  rates  which  reason  and  fairness  will  justify 
may  still  be  made  within  the  limitation  of  the  statute  j  but  to  make  out 
the  exceptional  case,  in  which  the  general  rule  of  the  statute  may  be  dis¬ 
regarded  on  the  ground  that  the  circumstances  and  conditions  are  not 
substantially  similar,  the  difference  in  cost  should  itself  be  exceptional, 
and  be  capable  of  proof  amounting  to  practical  demonstration. 

In  support  of  one  of  the  applications  presented  to  us  the  carrier  was 
able  to  make  a  showing  of  lower  cost  on  long-haul  freight  more  clear 
and  distinct  than  is  commonly  possible.  The  showing  was  that  the 
through  business  on  its  450  miles  of  road  was  transacted  by  different 
trains  from  the  local ;  that  these  moved  much  more  rapidly  and  carried 
vastly  the  most  freight  to  the  train  5  that  the  number  of  men  required 
was  much  less  in  proportion,  not  only  upon  the  trains,  but  for  t]ie  station 
and  terminal  service,  and  consequently^  all  the  items  of  exx)ense  were 
much  smaller.  These  facts,  which  were  apparent  to  the  customers  of 
the  road,  together  with  the  peculiarly  effective  water  competition, 
which  affected  principally  the  through  traffic,  influenced  intelligent 
men  doing  business  at  local  stations  to  admit,  in  giving  evidence,  that 
it  might  be  just,  and  even  necessary  in  some  cases,  that  the  charge  for 
the  shorter  haul  should  be  the  greater.  The  disproportion,  it  was  in¬ 
sisted,  had  been  too  great;  but  when  the  question  is  one  of  degree, reg¬ 
ulation  rather  than  prohibition  must  be  admitted  to  be  the  appropriate 
remedy;  and  the  carrier  must  keep  in  mind  that  if  the  right  be  estab¬ 
lished  in  any  case  to  make  the  greater  charge  for  the  shorter  haul,  it  is 
not  a  right  to  make  a  charge  not  just  or  reasonable  in  itself,  or  one 
which  will  work  unjust  preference  between  individuals,  localities,  or 


12 


commodities.  It  is,  on  the  other  hand,  a  right  grounded  in  justice,  and 
must  be  so  exercised  that  the  result  shall  be  equitable. 

III.  We  have  uext  the  case  of  dissimilar  circumstances  aud  condi¬ 
tions  supposed  to  be  made  out  by  a  showing  that  property  now  trans- 
^)orted  long  distances  at  very  low  rates  could  not  be  transported  at  all 
unless  concession  in  rates  were  made  to  it.  This  is  a  common  fact  in  rail¬ 
road  transportation  5  the  cases  are  to  be  met  with  in  the  traftic  of  all 
the  long  lines.  The  necessity  for  making  concessions  to  long-haul  traf¬ 
fic  in  the  case  of  articles  whose  value  in  proportion  to  bulk  or  weight  is 
small,  and  especially  in  that  of  the  necessaries  of  life,  which  are  bandied 
in  large  quantities,  and  in  the  supply  of  which  the  most  distant  coun¬ 
tries  compete,  has  long  been  conceded  wherever  railroads  exist.  The 
household  goods  of  immigrants  to  the  West  have  been  carried  for  them 
at  ver}"  low  rates,  and  the  results  of  their  agriculture  have  afterwards 
been  taken  for  seaboard  and  European  markets  in  recognition  of  the 
general  principle  that  the  traffic  must  not  be  charged  rates  beyond  what 
it  can  bear.  This  is  a  just  and  sound  principle  when  justly  applied^ 
and  the  country  may  be  said  not  only  to  have  acquiesced  in  its  recogni¬ 
tion,  but  to  have  desired  and  urged  its  application  in  a  great  variety 
of  cases.  Any  suggestion  that  it  was  meant  by  the  statute  to  abrogate 
it  would  scarcely  be  plausible,  especially  since,  when  not  misapplied, 
it  can  harm  no  one,  but  may  be,  and  often  is,  of  great  aud  manifest  ad¬ 
vantage,  in  enabling  distant  sections  of  the  country  to  come  into  closer 
commercial  relations,  and  to  exchange  to  their  mutual  benefit  their  dis¬ 
similar  productions,  or  to  compete  with  each  other  in  those  which  are 
similar. 

But  the  cases  must  be  very  rare  in  which  the  larger  charge  in  the 
aggregate  for  the  shorter  haul  of  the  same  kind  of  property  over  the 
same  line  in  the  same  direction  could  be  justified,  when  no  other  reason 
supported  it  than  the  fact  that  the  traffic  for  the  longer  haul  would  bear 
no  more.  Manifestly  such  a  discrimination  when  not  imperative  on 
other  grounds  is  unjust ;  and  the  injustice  becomes  oppression  when  the 
eftect  is  to  increase  the  burden  upon  the  traffic  which  has  the  shorter 
haul.  There  is  a  plain  limit  to  the  application  of  the  principle  that 
property  is  to  be  carried  at  rates  it  will  bear ;  aud  the  limit  is  reached 
when  the  rates  charged  are  so  low  that  further  reduction  would  neces¬ 
sitate  an  increase  of  the  charges  upon  other  traffic  in  order  to  make  up 
to  the  carrier  such  loss  as  the  reduction  causes.  If 'some  common  veg¬ 
etable,  worth  but  five  cents  a  hundred  pounds  more  at  a  market  a 
thousand  miles  distant  than  it  is  where  it  is  grown,  were  to  be  trans¬ 
ported  that  distance  for  the  sum  named,  the  producer  nearer  the  market 
if  subjected  to  a  higher  charge  would  have  a  right  to  complain  that 
not  only  did  the  discrimination  reduce  the  market  value  of  his  i)roduce, 
but  that  the  acceptance  of  the  unreasonably  low  rates  from  the  distant 
producer  had  a  tendency  to  increase  the  charge  for  the  shorter  haul,  so 


13 


as  to  make  it  not  only  relatively,  but,  when  considered  by  itself,  un¬ 
reasonably  high. 

It  is  a  matter  of  public  notoriety  that  a  belief  has  prevailed  to  a  con¬ 
siderable  extent  that  long  haul  traffic  was  in  many  cases  carried  at  a 
loss  ;  that  the  carriers  were  enabled  to  take  it  by  making  the  charges 
for  short  haul  traffic  greater  than  would  otherwise  be  necessary  or  rea¬ 
sonable,  and  that  this  constituted  an  abuse  that  ought  to  be  corrected 
by  law.  Persons  who  did  not  hold  to  this  belief  have,  on  the  other  hand, 
taken  low  charges  on  long  haul  traffic  as  a  proper  measure  for  all 
charges,  and  have  insisted  that  if  the  railroads  could  accept  the  low 
charges  for  one  class  of  business  they  could  and  ought  to  do  so  for  all 
classes.  And  this,  as  a  rule,  would  be  quite  true  if  the  railroads  had 
it  in  their  power  to  make  the  rates  for  all  j  which,  however,  is  far  from 
being  the  fact.  There  are  many  cases  in  which  they  have  the  option 
only  to  take  the  traffic  at  rates  prescribed  by  its  owners,  or  not  to  take 
it  at  all.  But  in  respect  to  such  cases,  we  must  repeat,  by  way  of  em¬ 
phasis,  that  a  successful  appeal  cannot  be  made  to  the  equity  of  the 
statute  on  the  mere  ground  that  long-haul  traffic  will  not  bear  higher 
rates,  if  in  fact  those  it  can  bear,  if  accepted,  will  cause  a  loss  to  the  car¬ 
rier  which  must  be  made  up  on  short-haul  traffic.  To  have  one’s  property 
carried  at  a  loss  would  not  be  matter  of  right,  but  of  favor;  and  favors 
in  transportion  are  not  to  be  granted  to  any  one  class  at  the  expense  of 
any  other. 

lY.  The  greater  charge  for  the  shorter  haul  has  been  in  some  cases 
defended,  on  the  ground  that  manufactures  and  other  industries  were 
thereby  favored  and  built  up.  But  a  question  likely  to  arise  in  such 
cases  is  whether  that  which  is  done  for  some  is  not  at  the  expense  or 
to  the  unjust  prejudice  of  others.  The  statutes  of  some  of  the  South¬ 
ern  States  seek  to  encourage  manufactures  by  permitting  special  rates 
to  be  made  in  their  favor ;  and  railroad  companies,  in  some  cases 
which  were  brought  to  our  notice,  have  entered  into  contracts  with 
parties  proposing  to  establish  large  manufactories  or  otherwise  en¬ 
gage  extensively  in  business  whereby,  in  consideration  of  the  in¬ 
vestment  of  some  named  sum  in  the  proposed  enterprise,  they  agree 
that  favorable  rates,  which  are  specified,  shall  be  given  on  its 
traffic  for  a  term  of  years.  The  purpose  of  such  laws  and  such  con¬ 
tracts  is  no  doubt  commendable,  but  the  practical  difficulty  of  giving 
them  effect  without  prejudice  to  the  interest  of  others  is  always  found 
to  be  serious.  Very  often  they  tend  to  the  benefit  of  large  establish¬ 
ments  and  to  the  prejudice  of  small.  Manufactures  are  infinite  in  va¬ 
riety  and  extent,  and,  while  it  might  be  easy  for  those  whose  transac¬ 
tions  were  large  to  obtain  the  benefit  of  an  impartial  law  made  for  the 
encouragement  of  all,  the  small  establishments,  sending  out  their  goods 
in  small  lots  and  irregularly,  might  find  the  law  practically  of  little  or 
no  value.  The  railroad  companies,  not  unwilling  to  make  long-time  con¬ 
tracts  for  rates  which  contemplate  a  large  business,  would  scarcely  be 


14 


expected  to  stipulate  for  them  with  the  small  establishments,  which  ex¬ 
ist  in  variety  in  every  town  and  hamlet. 

As  a  matter  of  fact  the  laws  and  the  contracts  which  are  made  for  the 
benefit  of  manufactures  usually  contemplate  not  all  kinds  of  manufact¬ 
ures,  but  only  those  leading  and  most  prominent  kinds  which  require 
large  cai)ital,  and  whose  operations  are  on  an  extensive  scale.  En¬ 
couragement  to  these  is  of  public  advantage  when  it  wrongs  no  one; 
but  it  is  just  as  much  the  duty  of  the  common  carrier  in  making  its  low 
rates  on  long  hauls  to  consider  whom  they  may  ruin  as  whom  thej"  may 
build  up  ;  and  while  the  carrier  cannot  be  held  responsible  for  the  con¬ 
sequences  which  flow  legitimately  from  tarifls  impartially  arranged,  it 
cannot  justify  on  the  ground  of  public  benefit  the  unequal  rates  which, 
however  beneficial  to  some,  may  be  equally  mischievous  to  others.  A 
great  establishment,  strengthened  by  the  favor  of  the  public  carriers 
until  it  acquires  the  power  to  crush  competition  and  actually  exercises 
that  power,  may  by  that  very  fact  become  an  enemy  to  the  civil  state ; 
and  no  benefit  it  can  give  to  the  public  in  the  low  prices  of  its  com¬ 
modities  or  otherwise  can  compensate  for  the  general  sense  of  wrong 
which  those  must  feel  who  are  injured  by  it,  or  for  the  sentiment  which 
grows  u])  in  view  of  its  operations,  that  the  law  fails  to  give  the  equal¬ 
ity  of  right  and  privilege  which  it  nominally  promises.  That  some 
such  great  establishments  have  been  fostered  by  the  aid  of  the  railroad 
companies  is  commonly  believed ;  and  i)rovisions  against  unjust  dis¬ 
criminations  in  this  statute  had  for  their  object,  among  other  things,  to 
bring  this  mischief  to  an  end.  The  plausible  excuse  of  public  benefit, 
if  it  ever  had  force  in  such  cases,  has  none  now,  for  the  statute  forbids 
what  public  sentiment  had  already  condemned. 

It  was  shown  by  the  evidence  that  the  rates  ux)on  long  hauls  were 
such  as  would  admit  of  the  pine  lumber  of  Mississippi  being  sold  in 
Wisconsin  in  competition  with  lumber  there  cut,  and  of  the  iron  of 
Alabama  being  carried^  through  Pittsburgh  to  Eastern  manufactories. 
If  the  lines  originating  in  Wisconsin  and  Pennsylvania  give  to  the  pro¬ 
ducers  of  those  States  corresponding  rates  for  the  traffic  in  the  other 
direction  under  similar  circumstances,  this  will  prejudice  no  one ;  but,  on 
the  contrary,  may  operate  to  the  public  advantage,  provided  always 
that  the  rates  actually  charged  are  compensatory.  The  petitioner  in 
this  case  claims  that  in  no  case  does  it  carry  such  long-haul  traffic  at 
rates  which  fall  below  cost.  By  this,  however,  is  meant  only  the  cost 
of  movement  of  the  particular  traffic,  leaving  out  of  view  the  fixed 
charges  of  the  road,  which  must,  in  any  event,  be  provided  for,  whether 
the  long-haul  traffic  is  or  is  not  taken.  This  distinction  between  the 
cost  of  movement  and  the  fixed  charges  often  becomes  of  importance 
in  such  cases  as  that  of  the  lumber  trade  just  mentioned.  That  trade  is 
new ;  the  roads  which  take  it  were  built  without  anticipating  its  spring¬ 
ing  up,  and  their  managers  made  their  calculation  for  business  to  meet 
the  whole  cost  of  operation  in  reliance  upon  such  traffic  as  was  then 


15 


apparent  or  probable.  The  fixed  charges  of  the  road  may,  for  purposes 
of  illustration,  be  assumed  to  equal  one-half  of  the  whole,  the  cost  of 
movement  of  freight  the  other  half.  The  rates  laid  were  doubtless  cal¬ 
culated  to  cover  the  whole,  with  a  margin  for  profit,  and  were  so  laid  that 
all  traffic  would  contribute  towards  both  fixed  charges  and  cost  of  move¬ 
ment.  But  now  comes  this  new  business,  aud  from  the  nature  of  the 
case  low  rates  are  a  necessity  to  it ;  it  can  pay  perhaps  little  if  anything 
more  than  half  what  is  paid  by  other  traffic.  But  taking  it  will  not 
increase  perceptibly  the  fixed  charges  of  the  road,  because  those  are 
made  up  of  items  that  must  be  paid  whether  the  traffic  is  large  or 
small.  What  is  added  to  the  cost  by  taking  it  is  simply  the  expense 
of  its  own  handling  and  movement  j  and  upon  the  supposition  made, 
there  might  perhaps  be  gain  to  the  road  instead  of  loss  in  taking  it  at 
anything  above  half  the  rates  which  are  levied  upon  other  traffic  corre¬ 
sponding  to  it  in  classification.  It  might  therefore  be  carried  at  such 
rates  without  wrong  to  any  one.  But  if  it  were  carried  at  lower  rates 
still,  not  only  would  the  other  traffic  be  left  to  pay  the  fixed  charges 
aud  the  cost  of  its  own  movement,  but  it  would  also,  to  some  extent,  be 
burdened  with  the  cost  of  movement  of  the  long-haul  traffic  thus  added 
to  the  business  of  the  road. 

The  injustice  of  this  would  be  very  apparent,  and  it  would  become 
intolerable  if  some  portion  of  the  short-haul  traffic  was  competitive  to 
the  long-haul  traffic,  and  was  so  heavily  taxed  by  higher  rates  as  to 
make  continuance  impossible.  It  is  very  plain  that  an  unrestricted 
power  to  make  such  rates  is  liable  to  infinite  abuses,  and  that  it  may  as 
easily  be  made  use  of  to  injure  one  enterprise  as  to  build  up  another. 
In  the  earnest  and  sometimes  unreasoning  rivalry  of  railroad  companies, 
it  has  no  doubt  often  been  employed  as  much  to  give  mere  volume  to 
business  as  for  any  anticipated  net  revenue;  aud  the  wrongs  have  in 
such  cases  far  exceeded  any  possible  advantages  that  could  accrue  either 
to  the  roads  themselves  or  to  the  public.  It  cannot  be  supposed  that 
in  any  case  the  true  interest  of  a  road  will  be  prejudiced  by  its  being- 
held  strictly  to  the  rule  that  excessively  low  rates  ou  some  traffic  are 
not  to  be  compensated  for  by  excessively  high  rates  on  other  traffic. 
Aud  if  rates  are  so  graded  as  to  violate  the  statutory  general  rule,  it 
cannot  be  accepted  as  justification  for  the  higher  rates  on  the  shorter 
haul  that  the  lower  rates  on  the  longer  haul  had  encouragement  to 
manufacturers  or  other  industries  for  their  motive. 

V.  The  chief  ground  on  which  the  applicants  pressed  for  relief  from 
the  long  and  short  haul  clause  of  the  statute  was  that  competition 
forced  the  railroad  companies  to  make  rates  to  aud  from  connecting 
points  to  the  level  of  which  it  was  not  possible  to  bring  the  charges 
at  non-competitive  points,  because  the  doing  so  would  cause  such  re¬ 
duction  of  revenues  as  would  force  roads  into  bankruptcy  and  ulti¬ 
mately  into  suspension.  It  was,  therefore,  as  was  said,  inevitable  that 
in  a  great  number  of  cases  the  greater  charge  should  be  made  for  the 


16 


shorter  haul;  and  nothiug  but  putting  a  stop  to  competition  bylaw 
would  prevent  it.  This  it  was  insisted  the  new  law  does  not  attempt 
or  intend.  On  the  contrary  the  importance  of  competition  in  fostering 
and  regulating  the  internal  commerce  among  the  States  is  clearly  noted. 
In  the  sixth  section  carriers  are  permitted  to  reduce  their  rates  at  any 
time,  but  are  forbidden  to  raise  them  except  after  giving  ten  days’ 
notice.  In  the  fifth  section  the  i^ooling  of  freight  is  forbidden,  unques¬ 
tionably  because  the  practice  was  regarded  as  having  a  tendency  to 
prevent  or  check  competition.  The  act  studiouslj’  omits  to  bring  the 
steamboats  and  other  independent  water  lines  within  its  control,  and 
must,  therefore,  have  contemplated  the  continuance  not  only  of  compe¬ 
tition,  but  of  those  things  which  competition  renders  inevitable.  The 
existence  of  competitive  forces  to  an  extent  that  the  railroad  companies 
at  competitive  points  are  unable  to  control,  it  was  therefore  argued, 
would  make  out  a  case  of  circumstances  and  conditions  so  dissimilar 
to  those  prevailing  at  non-competitive  points  as  might  justify  the  mak¬ 
ing  of  the  greater  charge  for  the  shorter  haul  which  was  in  general 
prohibited. 

The  competition  which  was  brought  to  our  attention  as  having  this 
imperative  force  first,  the  competition  of  railroads  with  water-ways: 
second,  the  competition  of  railroads  with  other  railroads  which  are  not 
subject  to  the  provisions  of  the  “  Act  to  regulate  commerce”;  third, 
the  competition  with  each  other  of  railroads  which  are  subject  to  that 
act; /owrt/i,  the  competition  of  business  or  trade  centers  with  each 
other,  operating  indirectly  upon  the  roads  which  form  their  channels  of 
trade ;  and,^/f/i,  the  competition  of  business  interests  in  like  manner  op¬ 
erating  upon  the  roads,  by  whose  assistance  the  business  is  carried  on. 
This  fifth  species  of  competition  has  already  been  remarked  upon  to  some 
extent,  and  it  has  been  seen  that  it  will  not  justify  a  railroad  company 
in  discriminating  between  its  own  customers  to  an  extent  that  would 
create  an  exception  to  the  general  rule  the  statute  prescribes.  We  pass 
it  now  Avithout  further  remark.  The  others  demand  at  our  hands  due 
consideration. 

I.  It  was  fairly  shown  before  us  that  instances  exist,  and  may  be 
found,  along  the  routes  of  petitioner’s  lines  in  the  States  of  Kentucky, 
Tennessee,  Georgia,  Alabama,  Mississippi,  and  Louisiana,  where  the  com¬ 
petition  of  water-ways  forces  down  the  railroad  rates  below  what  it  is 
possible  to  make  them  at  non-competitive  points  and  still  maintain  the 
roads  with  success  or  efficiency.  The  reason  is  that  the  carriers  b^'  water 
can  perform  the  service  at  A^ery  much  less  cost  than  the  carriers  by  land. 
The  general  fact  is  that  railroad  rates  for  the  transportation  of  property 
must  approximate  closely  those  which  are  made  between  the  same  points 
by  steamer,  and  the  steamer  rates  are  generally,  if  not  invariably,  much 
below  what  the  railroads  can  afford  to  accept  upon  all  their  business. 
In  such  cases,  if  competition  is  maintained,  more  must  be  charged  at 
interior  points  than  can  be  obtained  at  the  points  of  competition  ;  and 


17 


if  the  competitive  rates  are  such  as  are  productive  of  some  gain,  how¬ 
ever  slight,  the  nou-competitive  points  are  likely  to  receive  indirect 
advantage  therefrom,  while  the  competitive  points  have  the  larger  and 
more  direct  benefit,  and  are  afforded  a  choice  of  agencies  in  transporta¬ 
tion  whose  rivalry  may  fairly  be  expected  to  keep  the  cost  down  to  a 
minimum.  The  interior  points  may  have  no  ground  for  complaint  in 
such  a  case,  i)rovided  the  rates  they  are  charged  are  in  themselves  just 
and  reasonable,  even  though  the  effect  be  that  in  some  cases  more  is 
charged  for  the  short  than  for  the  long  haul  over  the  same  line  in  the 
same  direction.  This  general  fact  is  recognized  the  world  over ;  and  of 
English  railways  it  has  been  often  remarked  that  some  of  them  would 
be  deprived  of  much  of  their  value  if  they  were  not  allowed  to  meet 
water  competition  by  such  concessions  at  the  points  of  contact  as  the 
competition  would  compel. 

The  only  question  that  fairly  arises  in  regard  to  it  is  whether  the 
competition  is  kept  within  proper  bounds.  Vessel  owners  produced 
evidence  before  us  to  show  that  the  railroads  put  down  their  rates  to  a 
ruinous  point  in  their  determination  to  take  the  competitive  traffic  at 
all  hazards,  and  eventually  to  crush  out  competition  j  and  railroad  man¬ 
agers  retorted  with  evidence  that  the  blame  for  unremunerative  rates 
was  upon  their  rivals.  But  the  question  of  relative  fault  is  not  impor¬ 
tant  now.  Low  rates  are  a  necessity  of  the  situation  j  and  if  railroads 
compete  with  water  transportation  either  on  the  ocean  or  on  the  navi¬ 
gable  rivers,  they  have  no  choice  but  to  accept  such  rates.  To  compel 
the  roads  to  observe  strictly  the  general  rule  laid  down  by  the  fourth 
section  would  necessitate  their  abandonment  of  some  classes  of  business 
in  which  their  competition  with  water  transportation  is  now  of  public 
importance.  Vessel  owners  who  appeared  before  us  to  oppose  the  ap¬ 
plications  made  for  relief,  put  their  opposition  in  some  cases  explicitly 
on  the  ground  that  denying  the  applications  would  enable  the  vessel 
men  to  put  up  their  own  rates.  This  was  to  be  expected,  and  is  far  from 
being  blameworthy  if  in  fact  their  business  is  not  now  reasonably  profit¬ 
able  ;  but  it  is  suggestive  of  the  fact  that  the  interest  of  the  public  and 
that  of  any  class  of  public  carriers  is  not  in  all  respects  identical. 

It  is  more  than  probable  that  the  complaints  made  by  the  vessel  own¬ 
ers  against  certain  of  the  railroads  are  to  some  extent  well  founded  5 
that  the  railroads  have  not  only  made  the  rates  at  points  of  competition 
with  vessels  much  too  low  in  order  that  they  might  at  all  events  ob¬ 
tain  the  business,  but  that  this  has  been  done  in  disregard  alike  of  right 
and  of  true  policy.  This  is  only  saying  that  in  their  wars  of  rates  with 
vessel  owners  they  have  sometimes  shown  the  same  recklessness  as  in 
like  wars  among  themselves  5  but  the  fact  still  remains  that  they  must 
either  be  allowed  to  compete  with  vessel  owners  and  make  low  charges 
for  the  purpose,  or  they  must  leave  vessel  owners  in  possession  of  the 
business  without  the  check  upon  charges  which  competition  would  af¬ 
ford. 


23113 - 2 


18 


The  question  here  is  whether  this  limitation  of  competition  was  in¬ 
tended  by  the  statute ;  or,  on  the  other  hand,  did  Congress  intend  that 
the  existence  of  competition  might  in  some  cases  make  out  the  dissimi¬ 
lar  circumstances  and  conditions  which  would  support  a  greater  charge 
for  the  shorter  haul,  even  though  it  might  be  over  the  same  line  in  the 
same  direction,  the  shorter  being  included  in  the  longer  distance?  On 
this  subject  the  history  of  the  proceedings  in  Congress  which  resulted 
in  the  adoption  of  the  fourth  section  as  it  stands  is  instructive,  and  with 
such  brevity  as  is  practicable  it  is  recited  here,  not  as  determining  con¬ 
clusively  the  construction  of  the  section,  but  as  showing  beyond  ques¬ 
tion  that  the  benefits  of  competition  were  meant  to  be  retained,  and 
that  exceptions  to  the  rigorous  general  rule  were  provided  for  to  meet 
the  contingencies  which  the  competition  might  create. 

In  the  report  of  the  Senate  select  committee,  submitted  January  18, 
1886,  known  as  the  Cullom  report,  is  found  the  following  language  : 

No  question  connected  with  the  problem  of  railroad  regulation  has  given  the  com¬ 
mittee  more  perplexity  than  that  relating  to  the  utility  and  expediency  of  legislation 
prohibiting  a  carrier  from  charging  more  for  a  shorter  than  a  longer  haul  under  any 
circumstances;  not  that  we  have  any  doubt  as  to  the  injustice  of  such  a  charge  un¬ 
der  most  circumstances,  but  because  it  seems  inexpedient  to  enforce  such  a  regula¬ 
tion  under  all  circumstances. 

When  the  effect  of  the  proposed  prohibition  is  considered  with  reference  to  the 
whole  internal  commerce  of  the  United  States,  and  especially  with  reference  to  the 
necessity  of  preserving  the  prevailing  cheap  rates  for  long  distance  transportation, 
there  is  reason  to  fear  that  the  result  of  rigidly  enforcing  the  proposed  regulation 
would  be  to  stifle  competition  in  numberless  cases  where  it  now  exists  and  is  to  the 
general  public  interest,  and  perhaps  to  deprive  the  country  of -the  benefits  of  the  low 
through  rates  now  and  for  years  given  to  and  from  the  tide- water,  without  practical 
or  appreciable  advantage  to  intervening  points. 

The  bill  introduced  with  the  report  contained  the  following  provis¬ 
ion  upon  this  subject: 

Section  4.  That  it  shall  be  unlawful  for  any  common  carrier  subject  to  the -pro¬ 
visions  of  this  act  to  charge  or  receive  any  greater  compensation  in  the  aggregate  for 
the  transportation  of  passengers  or  property  for  a  shorter  than  for  a  longer  distance 
over  the  same  Hue  in  the  same  direction,  and  from  the  same  original  point  of  depart¬ 
ure,  if  such  greater  charge  for  the  shorter  distance  constitute  an  unjust  discrimina¬ 
tion  ;  but  such  greater  charge  for  a  shorter  distance  shall  be  presumptive  evidence 
of  unjust  discrimination,  which  may,  however,  be  rebutted  by  the  common  carrier. 

Upon  application  to  the  Commission  appointed  under  the  provisions  of  this  act, 
such  common  carriers  may,  in  special  cases,  be  authorized  to  charge  less  for  longer 
than  for  shorter  distances  for  the  transportation  of  passengers  or  property;  and  the 
Commission  may  from  time  to  time  make  general  rules  covering  exceptions  to  any  such 
common  carrier  in  cases  where  there  is  competition  by  river,  sea,  canal,  or  lake,  ex¬ 
empting  such  designated  common  carrier  from  the  operation  of  this  section  of  this 
act ;  and  when  such  exceptions  shall  have  been  made  and  published  they  shall  have 
like  force  and  effect  as  though  the  same  had  been  specified  in  this  section. 

Afterwards,  and  before  debate,  the  committee  on  February  16,  1886, 
reported  as  a  substitute  for  this  bill  another,  in  which  the  following  lan¬ 
guage  is  found  : 

Sec.  4.  That  it  shall  be  unlawful  for  any  common  carrier  to  charge  or  receive  any 
greater  compensation  in  the  aggregate  for  the  transportation  of  passengers  or  prop- 


19 


erty  subject  to  the  provisions  of  this  act  for  a  shorter  than  for  a  longer  distance  over 
the  same  line  in  the  same  direction,  and  from  the  same  original  point  of  departure  : 
provided,  however,  that  upon  application  to  the  Commission,  &c.  *  ^  *  [sub¬ 

stantially  as  before]. 

The  formal  discussion  of  the  measure  was  commenced  April  14,  1886, 
the  chairman  of  the  select  committee  opening  the  debate  by  a  speech  in 
which  he  said  concerning  the  fourth  section : 

It  is  agreed  that  this  is  the  principle  that  should  be  observed  as  a  general  rule. 
The  committee  found,  however,  that  the  principle  was  not  of  universal  application  ; 
that  there  were  cases  in  which  the  railroads  were  compelled  to  make  lower  rates  for 
longer  than  for  shorter  distances  by  the  great  law  of  competition,  which  is  stronger 
than  any  law  we  can  make,  and  that  in  some  cases  it  would  be  a  great  hardship  to 
the  public  as  well  as  the  railroads  to  rigidly  enforce  the  general  principle. 

It  is  perfectly  clear  that  the  intention  of  the  original  framers  of  the 
Senate  bill  was  to  leave  it  to  the  discretion  of  the  Commission  to  exempt 
carriers  from  the  operation  of  the  rule  in  cases  when  the  great  law  of 
competition”  made  such  a  relaxation  proper,  having  in  view  the  inter¬ 
ests  of  the  carriers  and  the  people. 

On  May  6, 1886,  Senator  Oullom  moved  to  amend  the  section  by  strik¬ 
ing  out  the  words  “covering  exceptions  to  any  such  common  carrier  in 
cases  when  there  is  competition  by  river,  sea,  canal,  or  lake.”  He  sup¬ 
ported  this  motion  by  the  suggestion  that  these  words  were  not  neces¬ 
sary,  and  that  without  them  the  Commission  would  have  the  same  power 
and  more.  Senator  Harris  favored  the  amendment,  as  giving  a  broader 
discretion  to  the  Commission,  and  it  was  adopted. 

On  May  12th,  a  motion  was  made  by  Senator  Camden  to  change  the 
phraseology  of  the  first  part  of  the  section,  so  that  it  should  read  “of 
like  kind  of  property  under  substantially  similar  circumstances  and  con¬ 
ditions.”  This  amendment  was  agreed  to  as  a  substitute  for  a  previous 
amendment  proposed  by  Senator  Camden,  and  with  little  additional  de¬ 
bate. 

The  bill  was  finally  passed  on  the  part  of  the  Senate,  section  4  re¬ 
maining  substantially  as  above,  with  the  insertion  of  the  following: 

,  But  this  shall  not  be  construed  as  authorizing  any  common  carrier  within  the  terms 
of  this  act  to  charge  and  receive  as  great  compensation  for  a  shorter  as  for  a  longer 
distance. 

The  bill  then  went  to  the  House  of  Eepresentatives,  and  was  referred 
to  the  Committee  on  Commerce.  That  committee  reported  as  a  substi¬ 
tute  for  it  the  bill  before  pending  in  the  House,  which  contained  the  fol¬ 
lowing  provision  upon  the  subject  embraced  in  section  4  of  the  Senate 
bill: 

That  it  shall  be  unlawful  for  any  person  or  persons  engaged  in  the  transportation 
of  property  as  provided  in  the  first  section  of  this  act  to  charge  or  receive  any  greater 
compensation  for  a  similar  amount  and  kind  of  property,  for  carrying,  receiving,  stor¬ 
ing,  forwarding,  or  hauling  the  same,  for  a  shorter  than  for  a  longer  distance,  which 
includes  the  shorter  distance  on  any  one  railroad ;  and  the  road  of  a  corporation  shall 
include  all  the  road  in  use  by  such  corporation,  whether  owned  or  operated  by  it  un¬ 
der  a  contract,  agreement,  or  lease  by  such  corporation. 


20 


In  opening  the  debate  on  July  21,  1886,  Mr.  Eeagan,  chairman  of  the 
House  Committee  on  Commerce,  severely  criticised  the  fourth  section 
of  the  Senate  bill,  saying  that  the  closing  part  of  the  section  substan¬ 
tially  nullified  the  former  part,  while  his  proposed  substitute  contained 
an  absolute  prohibition. 

The  minority  of  the  committee,  four  in  number,  opposed  the  substi¬ 
tution,  and  in  their  report  the  following  passage  occurs: 

Nor  do  the  minority  favor  the  provision  prohibiting  a  greater  charge  for  a  shorter 
than  a  longer  haul,  as  it  was  shown  to  a  satisfactory  degree,  as  we  think,  in  the  hear¬ 
ing  that,  where  two  competing  points  were  connected  by  water  as  well  as  rail,  it 
was  impossible  for  the  railroads  to  secure  the  traffic  unless  they  made  their  rates  as 
low  as  the  water  rates,  and  that  while  they  might  be  able  to  do  this  on  a  portion  of 
their  traffic,  it  would  be  destructive  of  their  interests  to  reduce  all  their  rates  to  those 
which  were  forced  upon  them  between  certain  points  by  the  competition  of  the  water 
routes. 

It  is  obvious  therefore  that,  in  the  House  as  well  as  in  the  Senate, 
it  was  understood  that  the  existence  of  competition  was  intended  to  be 
included  in  the  margin  of  discretion  provided  for  by  the  Senate  meas¬ 
ure.  The  question  as  to  this  point  was  distinctly  marked j  the  debate, 
so  far  as  this  section  was  concerned,  was  upon  that  basis.  On  July  30, 
1886,  the  substituted  bill  was  agreed  to  and  passed  on  the  part  of  the 
House.  A  conference  committee  was  appointed,  and  at  the  second  ses¬ 
sion  of  the  Congress  that  committee  agreed  upon  a  report,  which  was 
presented  to  the  Senate  December  15,  1886.  By  this  report  the  fourth 
section  of  the  Senate  bill  was  amended  so  as  to  read  as  it  now  stands. 

The  work  of  the  conference  committee  was  very  elaborately  and 
carefully  performed.  The  two  bills  which  were  referred  to  it  pre¬ 
sented  very  clearly  the  views  which  had  prevailed  in  the  two  houses 
respectively,  on  the  general  subject  of  relative  charges  on  long  and 
short  haul  traffic — the  House  view  of  an  inflexible  rule,  forbidding  ab¬ 
solutely  the  greater  charge  for  the  shorter  haul,  and  the  Senate  view 
that  the  rule  should  be  subject  to  exceptions  when  the  circumstances 
and  conditions  required  it.  The  conference  committee  accepted  de¬ 
liberately  the  Senate  view,  and  presented  it,  in  the  refDort  to  the  two 
houses.  In  the  Senate  the  report,  before  adoption,  was  discussed,  and 
what  was  proposed  by  it  on  this  point  of  vital  interest  was  very  dis¬ 
tinctly  brought  out  and  made  prominent ;  and  in  the  House,  where 
also  the  report  was  adopted,  nothing  which  was  said  by  any  one  indi¬ 
cated  that  the  situation  was  otherwise  understood. 

It  is  impossible  to  resist  the  conclusion  that  in  finally  rejecting  the 
“long  and  short  haul  clause”  of  the  House  bill,  which  i^rescribed  an 
inflexible  rule,  not  to  be  departed  from  in  any  case,  and  retaining  in 
substance  the  fourth  section  as  it  had  passed  the  Senate,  both  houses 
understood  that  they  were  not  adopting  a  measure  of  strict  prohibition 
in  respect  to  charging  more  for  the  shorter  than  for  the  longer  distance, 
but  that  they  were,  instead,  leaving  the  door  open  for  exceptions  in 
certain  cases,  and,  among  others,  in  cases  where  the  circumstances  .and 


21 


conditions  of  the  traffic  were  affected  by  the  element  of  competition, 
and  where  exceptions  might  be  a  necessity  if  the  competition  was  to 
continue.  And  water  competition  was  beyond  doubt  especially  in 
view. 

In  thus  deliberately  making  provision  for  competition,  even  though 
it  might  be  necessary  to  allow  for  the  puri^ose  exceptions  to  the  general 
rule  laid  down  in  the  statute.  Congress  must  be  supposed  to  have  done 
so  because  the  public  interest  required  it.  That  competition  is  the  life 
of  trade  is  one  of  the  most  generally  accepted  of  maxims;  among  its 
principal  benefits  is  the  protection  it  gives  against  extortionate  charges. 
But  legitimate,  open,  and  fair  competition  was  meant;  not  everything 
that  has  been  done  under  the  name  of  competition,  and  which  in  many 
cases  has  been  equally  destructive  of  public  and  of  private  right. 
Among  the  common  abuses  have  been  the  granting  of  special  fav¬ 
ors  in  exceptional  rates,  rebates,  drawbacks,  &c.,  all  of  which  are 
now  expressly  prohibited  by  law  when  they  assume  the  form  of 
unjust  discrimination.  There  has  also  been  favoritism  between  places 
and  communities  as  a  result  of  violent  competition ;  but  this  also  is 
no  longer  permissible.  Other  similar  wrongs  will  be  referred  to  further 
on ;  but  the  wars  of  rates,  under  the  excitement  of  which  traffic  is 
carried  at  a  loss,  to  be  made  good  by  excessive  charges  on  other 
traffic  at  other  times,  is  not  the  least  of  those  from  which  the  public  has 
suffered.  And  these  wars  are  as  indefensible  when  vessel  owners  are 
their  objects  as  when  made  between  the  railroads  themselves,  and  are 
not  to  be  justified  on  any  pretense  of  competition.  Water  transporta¬ 
tion  is  entitled  to  such  traffic  as  in  fair  rivalry  and  at  fair  prices  it 
can  take,  and  the  railroads  in  competition  with  it  must  recognize  this 
right  and  not  recklessly  attempt  to  preclude  its  exercise.  It  is  true 
that  while  the  roads  are  obliged  to.  publish  their  tariffs  and  the  carriers 
by  water  are  not,  the  former  are  at  a  disadvantage  in  the  competition ; 
but  possibly  the  law  in  this  regard  may  be  amended  if  justice  shall  be 
found  to  require  it. 

Every  railroad  company  ought,  when  it  is  practicable,  to  so  arrange 
its  tariffs  that  the  burden  upon  freights  shall  be  proportional  on  all  por¬ 
tions  of  its  line  and  with  a  view  to  revenue  sufficient  to  meet  all  the 
items  of  current  expense,  including  the  cost  of  keeping  up  the  road, 
buildings,  and  equipment,  and  of  returning  a  fair  profit  to  owners. 
But  it  is  obvious  that,  in  some  cases,  when  there  is  water  competition 
at  leading  points,  it  may  be  impossible  to  make  some  portion  of  the 
traffic  pay  its  equal  proportion  of  the  whole  cost.  If  it  can  then  be 
made  to  pay  anything  toward  the  cost,  above  what  the  taking  of  it 
would  add  to  the  expense,  the  railroad  ought  not,  in  general,  to  be 
forced  to  reject  it,  since  the  surplus,  under  such  circumstances,  would 
be  profit.  As  has  been  tersely  said  by  M.  de  la  Gournerie,  formerly 
inspector- general  of  bridges  and  railways  in  France,  a  railroad  “ought 
not  to  neglect  any  traffic  of  a  kind  that  will  increase  its  receipts  more 


22 


than  its  expenses and  long-haul  traffic  which  can  only  be  had  on 
these  terms  may  sometimes  be  taken  without  wronging  any  one,  when, 
to  carry  all  traffic,  or  even  the  major  part  of  it,  at  the  like  rates, 
would  be  simply  ruinous.  But  we  desire  to  apply  generally  to  every 
kind  of  competition  herein  discussed  the  observation  above  made,  that 
when  competition  leads  to  the  transportation  of  property  below  actual 
cost,  fairly  computed,  it  ceases  to  be  legitimate.  Fair  and  reasonable 
competition  is  a  public  benefit ;  excessive  and  unreasonable  competi¬ 
tion  is  a  public  injury.  Competition  is  to  be  regulated,  not  abolished. 
The  other  sections  of  the  law  of  themselves  imply  ample  authority  for 
its  regulation,  and,  in  connection  with  the  fourth  section,  suiDport  the 
interpretation  that  it  is  wholly  inadmissible  to  press  competition  to  a 
point  where  expenses  are  increased  beyond  the  increase  of  income. 

II.  The  question  whether  railroad  competition  with  other  railroads 
which  are  not  subject  to  the  control  of  this  law,  can  present  a  case  of 
dissimilar  circumstances  and  conditions,  within  the  meaning  of  section 
4,  may  possibly  be  one  of  greater  doubt.  The  classes  of  roads  not 
thus  subject,  and  whose  competition  might  be  severe,  are  the  Canadian 
roads  and  roads  which  are  entirely  within  the  control  of  a  single  State. 
As  regards  the  latter,  it  is  not  improbable  that  cases  exist  of  roads  not 
restrained  by  any  long  and  short  haul  clause  corresponding  to  the  Fed¬ 
eral  statute,  which  are  so  situated  in  respect  to  rivals  coming  under  the 
law  of  Congress  as  to  be  able  ta  monopolize  to  the  public  detriment  the 
traffic  at  important  points  of  competition  unless  the  latter  are  given 
equal  freedom  of  action.  We  do  not  understand,  however,  that  any  of 
the  pending  applications  are  of  this  nature,  and  we  therefore  leave  such 
cases  to  be  considered  when  they  shall  be  presented  more  directly. 
Competition  with  Canadian  roads  may,  it  is  believed,  present  a  case  of 
dissimilar  circumstances  and  conditions.  Whenever  such  roads  compete 
with  roads  in  the  United  States  for  business  between  one  part  of  our 
country  and  another,  a  state  of  circumstances  arises  and  exists  as  to 
such  business  which  justifies  American  roads  in  meeting  such  com¬ 
petition  by  a  corresponding  reduction  of  rates,  without  regard  to  the 
fact  that  in  so  doing  the  rates  between  the  terminals  may  be  reduced 
below  rates  to  and  from  intermediate  places  which  are  otherwise  rea¬ 
sonable  and  just  in  themselves.  The  fact  that  American  roads  are  left 
free  to  meet  such  competition  is  of  itself  an  assurance  that  no  extensive 
war  of  rates  is  likely  to  be  engaged  in  by  the  Canadian  roads,  or,  if 
engaged  in,  to  be  long  j)ursued. 

III.  The  competition  with  each  other  of  the  railroads  which  are  sub¬ 
ject  to  the  Federal  law  can  seldom,  as  we  think,  make  out  a  case  of 
dissimilar  circumstances  and  conditions  within  the  meaning  of  the  stat¬ 
ute,  because  it  must  be  seldom  that  it  would  be  reasonable  for  their  com¬ 
petition  at  points  of  contact  to  be  pressed  to  an  extent  that  would 
create  the  disparity  of  rates  on  their  lines  which  the  statute  seeks  to 
prevent.  But  we  cannot  now  assume  that  no  case  has  arisen  or  can 


23 


hereafter  arise  which  on  its  own  peculiar  facts  and  in  consideration  of 
its  special  equities  can  be  deemed  to  present  a  just  claim  under  the 
statute. 

First,  it  may  be  observed  here  that  in  some  i^arts  of  the  country  it  is 
not  easy  to  separate  railroad  competition  altogether  from  competition 
by  the  water-ways. 

Water  competition  is  not  limited  in  force  strictly  to  the  points  of  con¬ 
tact  of  water  and  rail  lines,  but  extends  its  influence  to  an  indefinite 
distance  therefrom,  qualifying  to  greater  or  less  extent  the  all-rail  rates. 
But  passing  that  consideration  by,  it  will  be  found  on  investigation  that 
cases  will  exist  in  which,  unless  the  force  of  strictly  railroad  compe¬ 
tition  is  allowed  to  create  exceptions  under  the  statute,  an  existing  com¬ 
petition  which  is  supposed  to  be  of  public  interest  must  come  to  an  end. 
And  where  that  is  the  case  the  strong  lines  will  in  general  be  gainers 
at  the  expense  and  sometimes  to  the  destruction  of  those  which  are 
weaker. 

One  such  case  is  that  of  the  railroad  extending  from  Pittsburgh,  Pa., 
parallel  to  the  Pennsylvania  Eailroad  as  far  as  Youngstown,  and  thence 
to  Ashtabula,  Ohio,  where,  through  connection  with  the  Lake  Shore,  it 
gives  to  the  people  of  Pittsburgh  and  Youngstown  competition  with  the 
Pennsylvania  road  in  their  business  to  and  from  New  York  and  New 
England.  The  peculiarity  of  the  competition  is,  that  the  business  on 
the  roads  respectively  is  started  in  opposite  directions  when  destined  to 
the  same  point,  so  that  on  east-bound  traffic  from  Pittsburgh  the  haul 
by  one  road  is  shorter  than  from  Youngstown  and  longer  by  the  other. 
As  the  Pennsylvania  road  has  the  shorter  line,  it  is  in  position  to  de¬ 
termine  what  the  rates  shall  be  and  the  longer  line  has  no  option  but 
to  conform  to  them.  In  making  them  the  leading  road  gives  to  Pitts¬ 
burgh  lower  rates  than  to  Youngstown,  as  it  justly  should  do,  in  recog¬ 
nition  of  the  geographical  position.  But  the  other  road  must  do  the 
same,  though  over  its  line  the  traffic  between  Youngstown  and  the  sea¬ 
board  will  have  the  shorter  haul.  There  is  nothing  unreasonable  or 
unjust  in  this  j  and  if  the  longer  line  were  to  attempt  a  change  which 
should  reduce  the  rates  from  Youngstown  to  the  level  of  those  of  Pitts¬ 
burgh  it  would  in  doing  so  only  open  a  war  of  rates  in  which  all  the  ad¬ 
vantages  would  be  with  its  rival.  Finding  itself  in  this  dilemma,  it 
applied  to  the  Commission  for  an  order  permitting  a  greater  charge  to 
made  on  traffic  to  and  from  Youngstown  than  is  made  on  that  to  and  from 
Pittsburgh,  and  its  application  is  strenuously  opposed  by  the  Pennsyl¬ 
vania  road,  which  insists  that  competition  by  this  roundabout  route  is 
illegitimate  and  ought  not  therefore  in  any  manner  to  be  aided. 

Whether  this  position  is  sound  the  Commission  may  determine  here  - 
after.  It  is  sufficient  to  say  of  the  case  at  this  time  that  it  is  one — and 
not  a  solitary  instance — in  which  a  strict  application  of  the  general  rule 
laid  down  by  the  statute  must  be  fatal  to  competition.  If  the  compe¬ 
tition  in  itself  is  illegitimate,  it  may  be  right  to  permit  its  destruction. 


24 


But  it  is  not  admitted  by  those  interested  in  the  road  just  mentioned 
that  its  case  is  of  this  nature.  It  is  shown  that  it  was  constructed  by 
Pittsburgh  capital  for  the  express  purpose  of  the  competition  j  and  it 
appears  that  though  the  route  is  indirect,  the  competition  has  given 
it  considerable  business,  and  large  investments  have  been  made  in 
reliance  upon  its  continuance. 

One  fact  obvious  on  the  statement  of  this  case  is  that  the  wrong 
against  which  the  long  and  short  haul  clause  of  the  statute  is  aimed  is  \ 
not  to  be  found  in  it.  When  the  greater  charge  for  the  shorter  haul 
over  the  same  line  in  the  same  direction  is  spoken  of,  the  natural  sug¬ 
gestion  to  the  mind  is  of  a  line  leading  with  some  directness  to  the  place 
to  which  the  traffic  is  destined  ;  and  there  seems  to  be  in  such  greater 
charge  a  manifest  unfairness,  since  it  deprives  the  place  of  shipment 
nearest  the  destination  of  its  proper  advantage  of  situation.  But  in  the 
case  stated  the  position  is  the  opposite  to  this ;  the  greater  charge  for 
the  shorter  haul  preserves  the  iDroper  advantage  of  situation,  and  has 
in  itself  no  element  of  injustice  to  localities.  It  is  the  situation  which 
forces  upon  the  road  an  unequal  charge  which  is  nevertheless  not  unfair, 
and  a  strict  application  of  the  statute  must  compel  the  surrender  of 
what  is  now  competitive  traffic  to  the  older  and  more  direct  route  whose 
very  conformity  to  the  general  rule  precludes  conformity  by  the  com¬ 
petitor. 

There  are  other  cases  in  the  country  of  roads  now  taking  part  in 
competitive  traffic  which  the  peculiarities  of  situation  will  compel  them 
to  abandon  if  the  long  and  short  haul  clause  of  the  statute  is  strictly 
applied.  This  to  some  extent  might  be  the  case  with  certain  north  and 
south  roads,  like  the  road  from  Cincinnati  to  Toledo,  and  that  from  New 
Albany  to  Chicago,  which  have  heretofore  engaged  considerably  in  east 
and  west  bound  traffic  which  they  deliver  to  or  receive  from  other  roads 
crossing  them,  or  at  their  terminals.  In  many  cases  these  roads  have 
been  accustomed  to  make  the  greater  charge  for  the  shorter  haul  sim¬ 
ply  because  the  direction  they  run  compels  it ;  but  in  doing  so  they  may 
wrong  no  one,  because  the  rates  are  not  determined  by  them  but  by  the 
direct  east  and  west  lines,  and  are  made  with  regard  to  relative  dis¬ 
tance.  Both  the  roads  named  now  have  applications  pending  for  relief 
from  an  embarrassment  for  which  they  are  not  themselves  responsible; 
and  they  aver,  with  plausibility  at  least,  that  the  public  interest  will 
suffer  if  they  are  shut  out  from  s  uch  share  in  competition  as  they  have 
hitherto  taken.  We  do  not  pass  upon  these  cases  finally  at  this  time, 
and,  therefore,  do  not  undertake  to  say  of  them  that  they  constitute 
cases  in  which  the  competition  of  roads  subject  to  the  Federal  law  creates 
the  dissimilar  circumstances  and  conditions  which  make  up  an  exceptional 
case.  But  this  brief  reference  to  the  facts  is  suggestive  of  a  possibility, 
at  least,  that  the  exceptional  case  may  exist ;  and  if  it  does  exist  a  strict 
enforcement  of  the  general  rule  might  be  found  quite  asinjurious  to  the 


25 

public  interests  as  to  those  of  the  railroads  which  would  thereby  be 
shut  out  from  competition. 

TV.  Whether  the  competition  of  towns  which  are  trade  centers  or  dis¬ 
tributing  points  can  in  any  case  make  out  the  dissimilar  circumstances 
and  conditions  independent  of  the  competition  of  the  carriers  is  a  ques¬ 
tion  which  may  be  said  to  be  presented  by  the  evidence  taken,  but  not 
with  such  distinctness  as  to  call  for  an  expression  of  opinion  at  this 
time.  The  pre-eminence  of  such  trade  centers  in  the  territory  reached 
by  the  petitioner's  roads  is  peculiar,  and  has  probably  been  increased 
by  the  con  cessions  in  rates  which  therailroads  havemade  to  them,  while 
making  less  concessions  or  none  at  all  to  less-important  stations.  This 
condition  of  affairs  tends  to  perpetuate  itself,  and  the  disparity  of  rates 
as  between  competitive  and  non-competitive  towns — the  former  being 
the  “  trade  centers  ” — must  have  had  some  influence  to  increase  steadily 
the  disparity  in  growth  and  prosperity. 

By  some  of  the  witnesses  before  us  this  was  bitterly  complained  of, 
while  by  others  it  was  defended  as  being  best  for  both  classes  of  towns. 
The  smaller  towns  in  this  part  of  the  country  it  was  said,  are  dependent 
on  the  trade  centers  for  their  supplies,  and  they  get  indirectly  the  bene¬ 
fit  of  low  rates  to  the  distributing  points  in  lower  prices  than  could 
otherwise  be  given  to  them.  In  proportion  also  as  the  distributing 
points  are  prosperous,  they  can  and  do  extend  to  the  dealers  at  other 
points  credit  and  indulgence.  The  prevalence  of  such  ideas,  and  the 
acting  upon  them  in  making  freight  tariffs,  gives  to  railroad  managers 
a  power  of  determining  within  certain  limits  what  towns  shall  be  trade 
centers,  and  what  their  relative  advantages  j  and  while  it  may  be,  as 
they  assert  it  is,  that  in  deciding  upon  rates  under  the  pressure  of  the 
competition  of  trade  centers  they  endeavor  to  do  justice  between  them, 
yet  as  they  do  not,  at  the  same  time,  feel  a  like  pressure  from  non-com¬ 
petitive  points,  it  is  obvious  that  justice  to  such  points  is  in  great  danger 
of  being  overlooked,  and  it  is  altogether  likely  that  it  is  so  to  some  ex¬ 
tent. 

One  result  is  that  towns  recognized  by  railroad  managers  as  trade 
centers  come  to  be  looked  upon  as  towns  with  special  privileges,  and 
other  towns  strive  for  recognition  as  such,  and  complain  perhaps  of  in¬ 
justice  when  they  fail.  It  was  made  very  clear  by  the  evidence  produced 
in  behalf  of  the  railroads  that  the  exceptionally  favorable  rates  which 
were  given  to  certain  localities  were  in  some  cases  given  to  build  up 
trade  centers;  and  as  they  had  had  that  effect,  and  large  establish¬ 
ments  had  been  located  at  such  centers,  invited  by  the  favoring  rates, 
it  was  urged  that  there  would  be  injustice  in  now  compelling  the  roads 
to  go  back  to  the  rule  of  equality.  Of  this  it  may  be  said,  first,  that 
as  between  different  localities  it  is  no  sound  reason  for  discriminating 
in  favor  of  one  as  against  another  that  the  purpose  is  to  build  up  the 
favored  locality  as  a  trade  center;  and,  second,  if  the  discrimination  has 
existed  and  has  had  its  effect,  the  fact  that  large  establishments  have 


26 


thereby  been  encouraged  is  no  reason  why  the  injustice  should  be  per¬ 
petuated.  This  statute  aims  at  equality  of  right  and  privilege,  not  less 
between  towns  than  between  individuals,  and  it  will  no  more  sanction 
preferential  rates  for  the  purpose  of  perpetuating  distinctions  than  of 
creating  them. 

These  general  views  will  indicate  as  far  as  we  deem  at  this  time  neces¬ 
sary  the  bounds  within  which  the  railroad  managers  must  limit  their 
action  in  making  charges  which  are  greater  in  the  aggregate  for  the 
transportation  of  passengers  or  of  the  like  kind  of  property  for  a  shorter 
than  for  a  longer  distance  over  the  same  line  in  the  same  direction,  the 
shorter  being  included  in  the  longer  distance.  With  responsibility  to 
the  law  and  to  the  restraining  power  of  the  Commission  in  case  the 
bounds  are  exceeded,  it  may  confidently  be  expected  that  all  carriers 
will  bring  themselves  into  conformity  with  the  general  law  so  far  as  it 
may  be  found  reasonably  practicable,  and  that  the  occasions  for  special 
interference  will  not  be  numerous.  Our  observation  and  investigations 
so  far  made  lead  to  the  conclusion  that  strict  conformity  to  the  general 
rule  is  possible  in  large  sections  of  the  country,  without  material  injury 
to  either  public  or  private  interests ;  and  that  in  other  sections  the  ex¬ 
ceptions  can  be  and  ought  to  be  made  much  less  numerous  than  they 
have  been  hitherto,  and  that  when  exceptions  are  admitted  the  charges 
should  be  less  disproportionate.  Yery  many  of  the  roads,  as  we  are  in¬ 
formed,  have  so  arranged  their  tariffs  as  to  make  no  exception  what¬ 
ever  5  and  where  that  has  been  proved  to  be  reasonably  feasible,  return 
to  the  former  custom  cannot  be  tolerated.  In  any  case  in  which  a 
company  fails  to  bring  its  tariffs  into  conformity  with  the  general  rule, 
if  parties  whose  interests  are  thereby  unfavorably  affected  complain,  it 
must  be  prepared  to  justify  its  action  by  a  showing  of  circumstances  and 
conditions  which  render  it  just  and  reasonable. 

In  the  views  above  expressed  the  members  of  the  Commission,  after 
full  consideration,  are  unanimous. 


The  order  for  temporary  relief  which  was  made  in  favor  of  the  peti¬ 
tioner  will  be  allowed  to  remain  in  force  until  the  day  originally  limited 
for  its  expiration,  and  in  the  mean  time  its  officers  will  have  the  oppor¬ 
tunity  to  make  thorough  revision  of  its  freight  and  passenger  tariffs,  in 
order  to  bring  them  as  nearly  as  may  be  reasonably  feasible  into  har¬ 
mony  with  the  general  rule  of  the  statute  and  with  the  views  expressed 
in  this  opinion.  That  they  may  be  brought  much  nearer  to  conformity 
than  they  now  are  without  the  sacrifice  of  any  substantial  interest,  we 
have  very  little  question;  and  as  business  adapts  itself  to  the  new  prin¬ 
ciple  established  by  Congress,  it  will  no  doubt  be  found  that  exceptions 
can  safely  and  steadily  be  made  less  and  less  numerous. 


27 


The  other  applications  for  relief  under  this  section  which  remain  to  be 
disposed  of  are  as  follows:  Fifteen ^are  by  the  Eichmond  and  Danville 
Eailroad  Company,  The  East  Tennessee,  Virginia  and  Georgia  Eailroad 
Company,  and  other  members  of  the  Southern  Eailway  and  Steamship 
Association,  which  is  an  association  of  railroad  and  steamship  com¬ 
panies  operating  lines  of  transportation  in  the  territory  south  of  the 
Ohio  and  Potomac  and  east  of  the  Mississippi  Eiver.  Eleven  are  by 
other  railroad  lines  in  the  same  territory,  the  Mobile  and  Ohio,  ‘‘  Queen 
and  Crescent,”  Illinois  Central,  and  others.  Two  are  on  behalf  of  com¬ 
panies  in  Louisiana  and  Texas.  Seven  are  presented  by  the  various 
transcontinental  lines.  One  is  in  favor  of  the  New  York,  New  Haven 
and  Hartford  and  other  companies  operating  short  lines  in  Connecticut, 
Ehode  Island,  and  Massachusetts,  which  also  seek  relief  against  alleged 
water  competition.  One  is  filed  by  the  Delaware  and  Hudson  Canal 
Company,  and  another  by  the  Eome,  Watertown  and  Ogdensburg  Eail¬ 
road  Company,  in  the  State  of  New  York,  asking  relief  in  respect  to 
Canadian  competition.  Four  are  presented  in  behalf  of  the  Pittsburgh 
and  Lake  Erie,  the  Cincinnati,  Hamilton  and  Dayton,  and  two  other 
roads  similarly  situated.  One  by  the  Mason  City  and  Fort  Dodge  Com¬ 
pany,  a  north  and  south  road  in  the  State  of  Iowa.  Four  are  in  behalf 
of  certain  roads  in  the  vicinity  of  Peoria.  Two  are  in  behalf  of  roads  in 
Southern  Illinois,  relating  to  their  connections  south  of  the  Ohio.  Three 
are  by  the  Wisconsin  Central  and  two  other  roads  in  Wisconsin  and 
Minnesota.  One  by  the  New  York,  Philadelphia  and  Norfolk,  in  Dela¬ 
ware.  One  by  the  Memphis  and  Little  Eock,  in  Arkansas;  and  one  by 
the  Detroit,  Grand  Haven  and  Milwaukee,  in  the  State  of  Michigan. 

The  temporary  orders  which  have  been  made  on  some  of  these  peti¬ 
tions  will  in  like  manner  be  permitted  to  remain  in  force  until  the  ex¬ 
piration  of  the  time  originally  limited  in  each.  No  further  order  will 
be  made  upon  any  of  the  petitions,  for  although  some  two  or  three  of  the 
cases  may  not,  by  the  facts  recited  in  the  applications  for  relief,  be 
brought  strictly  within  the  principles  above  discussed,  yet  they  all  pre¬ 
sent  what  are  claimed  to  be  different  circumstances  and  conditions 
adequate  to  authorize  exceptions  to  the  general  rule ;  and  if  the  peti¬ 
tioners  are  persuaded  that  the  fact  is  as  they  represent,  they  should 
act  under  the  statute  accordingly. 


The  points  that  are  intended  to  be  decided  at  this  time  are  as  fol¬ 
lows  : 

First.  That  the  prohibition  in  the  fourth  section  against  a  greater 
charge  for  a  shorter  than  for  a  longer  distance  over  the  same  line,  in 
the  same  direction,  the  shorter  being  included  within  the  longer  dis¬ 
tance,  as  qualified  therein  is  limited  to  cases  in  which  the  circumstances 
and  conditions  are  substantially  similar. 


28 


Second,  That  the  phrase  “  under  substantially  similar  circumstances 
and  conditions  ”  in  the  fourth  section,  is  used  in  the  same  sense  as  in 
the  second  section ;  and  under  the  qualified  form  of  the  prohibition  in  the 
fourth  section  carriers  are  required  to  judge  in  the  first  instance  with 
regard  to  the  similarity  or  dissimilarity  of  the  circumstances  and  con¬ 
ditions  that  forbid  or  permit  a  greater  charge  for  a  shorter  distance. 

Third,  That  the  judgment  of  carriers  in  respect  to  the  circumstances 
and  conditions  is  not  final,  but  is  subject  to  the  authority  of  the  Com¬ 
mission  and  of  the  courts,  to  decide  whether  error  has  been  committed, 
or  whether  the  statute  has  been  violated.  And  in  case  of  complaint  for 
violating  the  fourth  section  of  the  act  the  burden  of  proof  is  on  the  car¬ 
rier  to  justify  any  departure  from  the  general  rule  prescribed  by  the 
statute  by  showing  that  the  circumstances  and  conditions  are  substan¬ 
tially  dissimilar. 

Fourth.  That  the  provisions  of  section  one,  requiring  charges  to  be 
reasonable  and  just,  and  of  section  two,  forbidding  unjust  discrimina-. 
tion,  apply  when  exceptional  charges  are  made  under  section  four  as 
they  do  in  other  cases. 

Fifth.  That  the  existence  of  actual  competition  which  is  of  control¬ 
ling  force,  in  respect  to  traffic  important  in  amount,  may  make  out  the 
dissimilar  circumstances  and  conditions  entitling  the  carrier  to  charge 
less  for  the  longer  than  for  the  shorter  haul  over  the  same  line  in  the 
same  direction,  the  shorter  being  included  in  the  longer,  in  the  following 
cases : 

1.  When  the  competition  is  with  carriers  by  water  which  are  not  sub¬ 
ject  to  the  provisions  of  the  statute. 

2.  When  the  competition  is  with  foreign  or  other  railroads  which  are 
not  subject  to  the  provisions  of  the  statute. 

3.  In  rare  and  peculiar  cases  of  competition  between  railroads  which 
are  subject  to  the  statute,  when  a  strict  application  of  the  general  rule 
of  the  statute  would  be  destructive  of  legitimate  competition. 

Sixth.  The  Commission  further  decides  that  when  a  greater  charge  in 
the  aggregate  is  made  for  the  transportation  of  passengers  or  the  like 
kind  of  property  for  a  shorter  than  for  a  longer  distance  over  the  same 
line  in  the  same  direction,  the  shorter  being  included  in  the  longer  dis¬ 
tance,  it  is  not  sufficient  justification  therefor  that  the  traffic  which  is 
subjected  to  such  greater  charge  is  way  or  local  traffic,  and  that  which 
is  given  the  more  favorable  rates  is  not. 

Nor  is  it  sufficient  justification  for  such  greater  charge  that  the  short- 
haul  traffic  is  more  expensive  to  the  carrier,  unless  when  the  circum¬ 
stances  are  such  as  to  make  it  exceptionally  expensive,  or  the  long-haul 
traffic  exceptionally  inexpensive,  the  difference  being  extraordinary  and 
susceptible  of  definite  proof. 

Nor  that  the  lesser  charge  on  the  longer  haul  has  for  its  motive  the 
encouragement  of  manufactures  or  some  other  branch  of  industry. 


29 


Nor  that  it  is  designed  to  build  up  business  or  trade  centers. 

Nor  that  the  lesser  charge  on  the  longer  haul  is  merely  a  continuation 
of  the  favorable  rates  under  which  trade  centers  or  industrial  establish¬ 
ments  have  been  built  up 

The  fact  that  long-haul  traffic  will  only  bear  certain  rates  is  no  rea¬ 
son  for  carrying  it  for  less  than  cost  at  the  expense  of  other  traffic. 

C 


\ 


V 


.W 


w 


^ ' 


t 


t 


/J' 


■¥. 


'ffF-r  s  ■ 


i' 


r' 


¥  ' 


9 


{ 


,1 


S 


m- 

H?: 


/ 


f  ' 


.1 


tl  V; 


/ 


/•*'  ■ 


■  <  < 


'  y 
\ 


I  '  ^ 


•H 


